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SIP returns: Investing in mutual funds for more than a year and getting zero returns can be heartbreaking and bothersome. This simply compels investors to contemplate where they are going wrong. One thing that an investor must know is that one year is too soon to judge SIP performance. Also, the market is quite volatile lately. Thus, it’s obvious for an investor to worry about returns on their portfolio because of the stock market performance recently.
Without taking much of your time, let’s find out what could be the reasons behind the zero returns and how one can fix it.
SIP returns zero after 15 to 18 months? What’s wrong?
Systematic investment plans (SIPs) have become quite popular among investors. However, the market has been quite volatile lately, due to which many investors are worried about their SIP returns.
According to various media reports, there are a number of investors who have shared that despite a consistent investment period of 16-18 months, their portfolios are showing negative returns or no growth at all. Which is compelling them to wonder, what’s wrong?
This means lakhs of investors are seeing little to no growth and, in some cases, even losses in their SIP portfolios. Naturally, this brings up an important question: what should investors do now?
SIP returns: Funds that underperformed in last 6 months and 1 year
Tata Small Cap Fund – Direct Plan
Return in 6 months: -24.94%
Motilal Oswal Midcap Fund – Direct Plan
Return in 6 months: -21.81%
Invesco India Focused Fund – Direct Plan
Return in 6 months: -19.10%
Motilal Oswal Flexi Cap Fund – Direct Plan
Motilal Oswal Flexi Cap Fund – Direct Plan
Motilal Oswal Multi Cap Fund – Direct Plan
Return in 6 months: -21.44%
360 ONE ELSS Tax Saver Nifty 50 Index Fund – Direct Plan
Return in 6 months: -6.11%
Why is one year not enough to evaluate SIP performance?
Global uncertainty can heavily influence short-term returns in SIP. A longer time horizon allows your investment to benefit from rupee cost averaging and compounding, which are the core advantages of SIPs.
For example, Tata Small Cap Fund – Direct Plan, which gave -24.94 per cent return in 6 months and -16.30 per cent return in 1-year. The same fund gave a return of 16.94 per cent over the last 5 years and a return of 18.51 per cent over the last 7 years.
Another example to prove that long-term investment can be beneficial for investors. Another fund, Motilal Oswal Midcap Fund – Direct Plan, which gave -21.81 per cent return in 6 months and -10.99 per cent return in 1-year. The same fund gave a return of 21.36 per cent in 5 years, 19.92 per cent return in 7 years and 16.96 per cent return in 10 years.
SIP returns: Here’s what you are doing wrong and how to fix mistakes
During market volatility, it’s quite normal for mutual fund investments to show short-term losses. However, that doesn’t mean an investor should rush to redeem their investments out of fear. Instead, it’s important to stay calm, review their fund’s performance carefully, and consult their financial advisor before making any decision.
Remember, if you redeem your equity mutual fund investments within one year, you may have to pay an exit load of around 1% in most cases, which can further reduce your returns.
Before investing, assess your risk tolerance to ensure your strategy aligns with your financial goals, time horizon, and comfort with market ups and downs.
If your mutual fund portfolio is in the red, take a step back and assess the bigger picture. Compare your fund’s performance with similar schemes in the same category and across different categories.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
